Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Texas Capital Bancshares Inc. (TCBI - Analyst Report) reported dismal third-quarter 2013 results with operating earnings of 74 cents per share, missing the Zacks Consensus Estimate by a sliver. Moreover, results lagged the year-ago earnings of 80 cents.

Higher expenses and lower top line were the primary reasons for the earnings miss. Moreover, the company recorded an elevated level of provision for credit losses. However, improvement in net interest income along with elevated loans and deposits acted as the tailwinds.

Net income available to common shareholders came in at $31.0 million compared with $32.5 million in the prior-year quarter.

Quarter in Detail

Total revenue reached $125.6 million in the quarter, down 11.5% year over year. However, revenues surpassed the Zacks Consensus Estimate of $118 million.

Texas Capital’s net interest income was $108.8 million, up 12.3% from the year-ago quarter. Total loans increased 11.8% to $10.4 billion, while deposits elevated 34.3% to $9.0 billion from the prior-year period. However, net interest margin decreased 15 basis points year over year to 4.21%.

The decline stemmed from an expansion in loans with lower yields, partially offset by a reduction in funding costs. Yet, growth in loans offset the negative impact from a fall in yields and hence contributed to higher net interest income.

Texas Capital’s non-interest income of $10.4 million inched down 1.9% year over year. The decrease was mainly backed by a fall in brokered loan fees earned in the mortgage warehouse lending unit and reduced service charges on deposit accounts and swap fees.

Texas Capital’s non-interest expense bolstered 16% year over year to $62 million. The growth mainly reflects higher salaries and employee benefit expenses primarily related to business growth.

Credit Quality

Credit metrics were a mixed bag in the quarter. Non-performing assets equaled 0.60% of the loan portfolio plus other real estate owned assets, reflecting a year-over-year decline of 56 basis points. Net charge-offs decreased to $0.05 million from $1.2 million in the prior-year quarter.

Non-accrual loans decreased and came in at $35.7 million or 0.44% of loans held for investment compared with $57.3 million, or 0.87% in the prior-year quarter. However, provisions for credit losses were $5.0 million, up 66.7% from $3.0 million in the prior-year quarter. The increase in provision reflects significant growth in loans held for investment during the quarter.

Capital Ratios

Capital ratios were also mixed in the quarter. Texas Capital’s tangible common equity to total tangible assets was 8.3%, up from 7.9% in the prior-year quarter. Return on average equity was 13.74% and return on average assets was 1.25%, compared with 17.27% and 1.40%, respectively, for the year-ago quarter.

Stockholders’ equity escalated 33% year over year to $1.1 billion as of Sep 30, 2013. The increase was mainly related to the offering of 6 million preferred shares for net proceeds of $145.1 million in the first quarter of 2013 along with the retention of net income.

Our Viewpoint

Texas Capital’s market share gains and organic growth is impressive. Its efforts to hire experienced bankers and expand its worldwide presence are also encouraging.

Though the mounting expenses  remain a concern for the company, we believe that with an eventual improvement in the Texan economy, the company will deliver better earnings.

Another south-west bank, BOK Financial Corporation (BOKF - Analyst Report), is expected to report third-quarter earnings on Oct 30, 2013.

Texas Capital carries a Zacks Rank #4 (Sell). Some south-west banks that are worth considering include Banc of California, Inc. (BANC - Snapshot Report) with a Zacks Rank #1 (Strong Buy), while First Financial Bankshares Inc. (FFIN - Snapshot Report) carries a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%